International Intertemporal Solvency in Industrialized Countries: Evidence and Implications

Liu, Peter C.; Tanner, Evan

doi:10.2307/1060891

Cited by 50 publications

(39 citation statements)

References 17 publications

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“…A first approach uses a time series analysis to study the long-term relationship between exports and imports or the I(0) stationarity of the accumulation process of external debt -see Chortareas et al (2004). With the exception of Liu and Tanner (1996), who consider the existence of structural changes, the general finding is that the relations are not stationary for the major industrialized countries including the US, UK, Canada, Germany and Japan. A second approach has applied panel data unit root tests to improve the statistical inference that is obtained using individual tests -see Wu (2000), Wu et al (2001) and Holmes (2006), among others.…”

Section: Testing For External Sustainability: Empirical and Theoreticmentioning

confidence: 99%

Testing for external sustainability under a monetary integration process. Does the Lawson doctrine apply to Europe?

2015

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Monetary integration, and more specifically, the creation of a monetary union in Europe, raises new economic questions concerning its functioning and governance. In particular, we focus on the implications of high and persistent current account deficits for the economic performance of monetary union members in the medium term. Recent literature has argued that conventional measures of external sustainability are misleading because they omit the effects of capital variations on net foreign asset positions due to, among others, stock or debt market crises. In this paper we revisit external sustainability making use of the database developed by Lane and Milesi-Ferretti (2007) that includes these "valuation effects". The sample period studied covers from the launching of the monetary integration process in Europe (the creation of the European Snake in 1972) up to 2011. Our econometric methodology accounts for the increasing cross-section dependence among EMU countries as well as for possible structural breaks endogenously determined. The results point to the need of abrupt adjustments, either led by the markets or promoted by pro-active policy measures, in order to offset external disequilibria. These results would give support to the surveillance measures proposed by the European Commission (2009, 2010a) and would reject the Lawson's doctrine of "laissez-faire".

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Section: Testing For External Sustainability: Empirical and Theoreticmentioning

confidence: 99%

Testing for external sustainability under a monetary integration process. Does the Lawson doctrine apply to Europe?

2015

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“…The stationarity and sustainability of current account balances has been the focus of many researchers over a number of years (see, inter alia, Trehan and Walsh, 1991;Gundlach and Sinn, 1992;Otto, 1992;Wickens and Uctum, 1993;Liu and Tanner, 1996;Wu, 2000 andWu et al, 2001). These studies have provided mixed conclusions with respect to case studies involving subsets of the OECD countries.…”

Section: Introductionmentioning

confidence: 99%

“…Bearing in mind the earlier work of Roubini and Wachtel (1998), the contribution of this paper is to offer a more formal assessment of current account sustainability for the transition economies. Early studies that investigate the stationarity of the current account deficit have largely concerned the OECD countries and include, inter alia, Trehan and Walsh (1991) and Wickens and Uctum (1993) who look at the USA, Otto (1992) who looks at the USA and Canada, Liu and Tanner (1996) who examine the G7 countries, and Gundlach and Sinn (1992) who examine a larger sample of twenty three countries. These studies generally found that current accounts are non-stationary for several major industrialized countries.…”

Section: Introductionmentioning

confidence: 99%

Current Account Deficits in the Transition Economies

Holmes¹

2004

Prague Economic Papers

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Abstract:This study tests for the stationarity and sustainability of current account deficits for ten transition economies. For this purpose, a new test is employed that allows one to test for unit roots in heterogeneous panel datasets. While the benefits from creating a panel to overcome low test power are well known, this test also offers key advantages over existing alternative panel data unit root tests: it is able to identify which members within the panel are responsible for rejecting the null hypothesis of joint non-stationarity. In addition, the SU-RADF test does not presume disturbances that are independently and identically distributed. Using data covering 1993 -2001, this study finds strong evidence in favour of current account mean-reversion for six countries. Of the six countries in the sample that joined the European Union in May 2004, non-stationarity was confirmed in the case of Lithuania only.

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“…Examples of empirical works based on the current account are Trehan and Walsh (1991), Wickens and Uctum (1993), Ahmed and Rogers (1995), Liu and Tanner (1996), Nason and Rogers (2006), and Engel and Rogers (2009), among others. Another stream of empirical research has analyzed the stationarity nature of the stock of external debt.…”

Section: Introductionmentioning

confidence: 99%

Global imbalances and the intertemporal external budget constraint: A multicointegration approach

Camarero

Carrion‐i‐Silvestre

Tamarit

2013

Journal of Banking & Finance

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International Intertemporal Solvency in Industrialized Countries: Evidence and Implications

Cited by 50 publications

References 17 publications

Testing for external sustainability under a monetary integration process. Does the Lawson doctrine apply to Europe?

Testing for external sustainability under a monetary integration process. Does the Lawson doctrine apply to Europe?

Current Account Deficits in the Transition Economies

Global imbalances and the intertemporal external budget constraint: A multicointegration approach

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